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Tata Steel (TISC.BO)
Buy Equity Research
Above expectations: European ops continue to surprise; CL-Buy
What surprised us
Tata Steel reported 4QFY11 consolidated net income of Rs41.7bn (+66%
yoy, +316% qoq). Adjusted for the exceptional item of US$511mn,
primarily arising from sale of Teeside assets, 4QFY11 net income of
Rs18.9bn was 24% ahead of our and Reuters consensus estimates.
Highlights: 1) Indian operations continued to be strong, with 4Q EBITDA at
Rs30.6bn, up 9% qoq led by higher than expected realisations – up 8%
qoq. EBITDA/ton was US$402 vs. US$382 in 3QFY11 (GSe: US$400). 2)
European operations surprised to the upside – reporting EBITDA of
US$217mn, up 147% qoq due to higher volumes and better pricing. In
Europe, deliveries stood at 4.1 mn ton, up 19% qoq as the company
liquidated its stocks. EBITDA/ton of US$52 (GSe: US$45) was a surprise.
Utilisations in Europe stood at 89%. Consolidated net debt as of FY2011
stood at US$10.4bn, vs. US$ 11.8bn in 3Q. Management expects
annualised gains of GBP 250 mn (in 18 months) on completion of the
recently announced restructuring measures in European long business.
What to do with the stock
Tata Steel India continues to deliver strong operating performance, aided
by integrated steel operations and a robust ferro alloy business. We expect
the full benefit of price hikes in Europe to flow through in 1QFY12. Recent
restructuring initiative should improve the competitive positioning of this
business in the long term. We cut our FY12-13 EPS estimates by 9%/8%
after factoring in lower volumes in Europe. We raise our 12-m TP to Rs774
(from Rs761) on 1.9X FY12E P/B (unchanged), reflecting higher BVPS from
flow through of exceptional income reported in FY11. Reiterate Buy rating
(on CL). Risks: weaker demand and higher than expected costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel (TISC.BO)
Buy Equity Research
Above expectations: European ops continue to surprise; CL-Buy
What surprised us
Tata Steel reported 4QFY11 consolidated net income of Rs41.7bn (+66%
yoy, +316% qoq). Adjusted for the exceptional item of US$511mn,
primarily arising from sale of Teeside assets, 4QFY11 net income of
Rs18.9bn was 24% ahead of our and Reuters consensus estimates.
Highlights: 1) Indian operations continued to be strong, with 4Q EBITDA at
Rs30.6bn, up 9% qoq led by higher than expected realisations – up 8%
qoq. EBITDA/ton was US$402 vs. US$382 in 3QFY11 (GSe: US$400). 2)
European operations surprised to the upside – reporting EBITDA of
US$217mn, up 147% qoq due to higher volumes and better pricing. In
Europe, deliveries stood at 4.1 mn ton, up 19% qoq as the company
liquidated its stocks. EBITDA/ton of US$52 (GSe: US$45) was a surprise.
Utilisations in Europe stood at 89%. Consolidated net debt as of FY2011
stood at US$10.4bn, vs. US$ 11.8bn in 3Q. Management expects
annualised gains of GBP 250 mn (in 18 months) on completion of the
recently announced restructuring measures in European long business.
What to do with the stock
Tata Steel India continues to deliver strong operating performance, aided
by integrated steel operations and a robust ferro alloy business. We expect
the full benefit of price hikes in Europe to flow through in 1QFY12. Recent
restructuring initiative should improve the competitive positioning of this
business in the long term. We cut our FY12-13 EPS estimates by 9%/8%
after factoring in lower volumes in Europe. We raise our 12-m TP to Rs774
(from Rs761) on 1.9X FY12E P/B (unchanged), reflecting higher BVPS from
flow through of exceptional income reported in FY11. Reiterate Buy rating
(on CL). Risks: weaker demand and higher than expected costs.
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